Employers Pay a Price for Behaving Badly

A person’s employment is integrally linked not only with their livelihood, but also with their self-esteem and self-worth. Being dismissed from employment (i.e., being terminated) can be a traumatic event for an employee; not only financially, but also emotionally. Employers are expected to recognize the distress, vulnerability, and humiliation often experienced by employees who are being dismissed and respond in an appropriate manner both during the termination process as well as after.

Employers’ Termination Responsibilities

Generally, when an employee is fired “without cause” (i.e., without sufficient reason) in Canada, they are owed termination entitlements. An employee’s termination entitlements will differ depending on many factors including the jurisdiction in which they work, whether they have a valid and enforceable termination agreement, their age, tenure, availability of comparable employment, etc. You can read more on termination entitlements in this article. In most situation, employers are legally required to pay at least the minimum termination entitlements immediately after the employee is dismissed.

Furthermore, when an employee is dismissed, the employer has a legal obligation to pay the employee everything they have earned up to the date of termination, and to provide the employee with a Record of Employment (ROE) within 5 days of termination. The ROE allows the dismissed employee to seek employment insurance (EI) benefits, if eligible, while they look for other work.

Often, employers are unaware of their obligations to employees and make missteps when dismissing employees due to sheer ignorance. Other times employers are simply behaving badly and flouting their obligations either in hopes of saving money, inflicting some financial or emotional pain to the former employee, or both.

The Price for Behaving Badly – Recent Case Law

In my 10+ years of practicing law, I have seen my share of employers behaving badly when dismissing an employee (whether inadvertently or deliberately), and getting away with it. But in the last few years the Courts have become increasingly willing to punish such employers for their behaviour through awards of moral and punitive damages.

Moral damages (also known as “aggravated damages”) are usually awarded when the manner of termination is done in bad faith and ends up causing the employee mental distress.

Punitive damages (also known as “exemplary damages”) are awarded where the employer’s behaviour is so deplorable that it warrants punishing the employer.

Below are just a few of the recent cases that have punished employers for behaving badly both during and after dismissal of an employee.

The Pohl Case – Ontario

In a recent Ontario decision (Pohl v Hudson’s Bay Company, 2022 ONSC 5230) a 50-year-old sales manager with 28 years of tenure at Hudson’s Bay was offered a demotion as a “sales associate lead” with less hours, no guarantee of hours, less pay and a contract that would allow the company to fire him by giving him only minimum entitlements on the condition that Mr. Pohl “voluntarily resign” from his managerial position. Mr. Pohl refused the offer and was subsequently walked off the premises. He sued Hudson’s Bay for wrongful dismissal and, unsurprisingly, was awarded 24 months of pay in lieu of notice, amounting to approximately $122,000 for wrongful termination. Additionally, the employee was awarded $45,000 in moral damages and $10,000 in punitive damages.

The court’s reasoning for awarding moral damages included the employer’s insensitive decision to walk the employee out the door on termination and needlessly embarrassing Mr. Pohl; providing an offer for a position that was “misleading” because it (a) was designed to eliminate his termination entitlements while providing him with nothing substantial in exchange; (b) included a provision that purported to allow the employer to unilaterally change the employment contract without triggering a constructive dismissal; and (c) contained provisions to permit the employer to schedule Mr. Pohl for zero shifts. The Court found that the employer’s conduct was an attempt to take advantage of a loyal, long-term employee during a vulnerable moment and was a breach of the employer’s duty of good faith and fair dealing warranting moral damages.

Furthermore, Hudson’s Bay failed to pay Mr. Pohl’s wages up to the time of termination (despite repeated demands that they do so) and also failed to issue a timely and correct ROE. Such behaviour on the part of the employer was considered by the court to be so deplorable as to warrant the exemplary damages awarded to Mr. Pohl.

The Moffatt Case – British Columbia

In Moffatt v Prospera Credit Union, 2021 BCSC 2463 (CanLII) Ms. Moffatt was one of many employees who were dismissed due to a restructuring of the business. Upon termination, Ms. Moffatt was provided with a termination letter that contained several issues including a wrong amount of notice, a wrong amount for benefits, and it provided for an extended non-solicitation of the company’s business of 12 months (versus the 6 months non-solicitation clause contained in her employment agreement). The letter also told Ms. Moffatt that she was “required” to sign the letter to receive these amounts.

The court in this case was willing to award Ms. Moffatt approximately $7,500 in punitive damages resulting from the errors contained in the termination letter, irrespective of Prospera’s argument that the errors in the letter were administrative only (they had, after all, terminated over 100 employees using the same template). The judge stated that,

“The errors in the termination letter presented to the Plaintiff would have limited her entitlements and increased her obligations. By contrast, the Defendant stood to benefit from the misleading errors contained in the Plaintiff’s termination letter. Further, had the Plaintiff signed the termination letter as presented she would have released legal claims against the Defendant…

…The volume of termination letters an employer issues does not lessen the obligation to ensure they are correct. There is no volume discount on correctness for termination letters.”

Ms. Moffatt also sought moral (aggravated) damages against Prospera, however the Court refused to award them because they found no breach of the employer’s duty of good faith during the dismissal. The dismissal was done privately and was due to a restructuring of the business, which was truthfully conveyed to Ms. Moffatt.

The Russell Case – Ontario

In Russell v. The Brick Warehouse LP, 2021 ONSC 4822 (CanLII) Mr. Russell, a 36-year employee of The Brick, was terminated at the age of 57 due to a company restructuring resulting from the Covid-19 pandemic. On dismissal, Mr. Russell was provided with a termination letter that included an offer of certain payments which were conditional on him signing a full and final release (meaning that Mr. Russell would have no legal recourse against The Brick). The termination letter did not tell Mr. Russell that if he did not sign the release, he would still receive his minimum termination entitlements, as is legally required.

Upon receipt of the letter, Mr. Russell immediately requested that his entitlements on termination (including statutory minimums to severance and pay in lieu of notice of termination) be deposited directly into his RRSP. Through what the court described as a series of “inadvertent missteps” The Brick ended up withholding these minimum payments until the start of the trial, which was some 7 months after Mr. Russell’s termination.

Ultimately, the court held that the failure to advise Mr. Russell of his unconditional right to the statutory minimum payments was a “serious defect” and amounted to a failure to treat him honestly and in a forthright manner. Along with 24 months of pay in lieu of notice amounting to approximately $170,000, Mr. Russell was awarded $25,000 in moral damages because of the employer’s failure to provide him with appropriate information regarding his minimum entitlements and lack of timeliness of payment.

Takeaways for Employers

We anticipate these decisions to be a harbinger of things to come when it comes to censuring employers who fail to meet their obligations to employees or who behave in a manner that the courts deem worthy of punishment. Importantly, it is apparent that courts are less and less willing to overlook bad behaviour that is framed as a mere “misstep” or “clerical error” because the potential unintended consequences to the employee are too great to ignore.

These cases serve as a reminder, if not a wake-up call, to Canadian employers that they must treat their employees with propriety, respect and dignity not only throughout the employment relationship, but as it is ending and afterward. A great part of that is ensuring that employees receive all of their termination entitlements and are receiving proper information from the employer.

Employers can protect themselves from such unintended consequences by obtaining good legal and HR advice BEFORE terminating an employee and ensuring that terminations are conducted properly in all respects.

About the Author

Ljubica Durlovska is an Employment Lawyer at HRC Law Professional Corporation. With a passion for employment and labour law, she has spent many years helping employers with a wide range of workplace issues, including assisting clients with employment contracts, discipline, investigations, policy development, accommodation, termination, and employment-related human rights and health & safety matters. Ljubica also has previous experience in corporate/commercial law and leasing.

About HRC Law

At HRC Law Professional Corporation, our mission is to provide Canadian businesses with affordable, accessible and top-tier legal services. We will never bill you for our time or surprise you with additional fees. For more information on how we can help, visit www.hrcemploymentlaw.com or contact the author directly by sending an email to ldurlovska@hrcemploymetnlaw.com.